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What Broadcast And Cable Executives Still Don’t Understand About YouTube

There are many exciting things happening in the online video industry, but to my mind, none is more noteworthy than the radical transformation of YouTube.

YouTube is shedding its scruffy adolescence and seeking to redefine what entertainment means in the online video era. In fact, with each passing day, it becomes more evident that YouTube is building a parallel universe to the traditional world of cable TV, targeting niches that have long been mined by a multitude of specialty channels. This theme will crystallize as 2012 unfolds.

YouTube’s 100 new channels of original online-only content have begun rolling out and will continue to do so throughout the year. For a relatively modest $100 million (by Google’s standards!) YouTube is getting first dibs on programming that is laser-targeted at valuable niches. Importantly, it is helping galvanize a community of content creators who have either not been a part of the traditional pay and broadcast TV ecosystem, or are seeking a new, less constrained environment to play in, or both.

The latest sign of YouTube’s magnetic pull came yesterday as Electus (the multimedia studio headed by NBC’s former entertainment honcho Ben Silverman and backed by IAC) announced that it had recruited Bruce Seidel to head its food channel on YouTube (NSDQ: GOOG). Seidel, who most recently led programming for the Cooking Channel and was previously a senior programming executive at Food Network, where he developed the Iron Chef shows among others, obviously knows a thing or two about creating compelling food-related content. No doubt he’ll quickly establish Electus’s food channel as a popular draw while leveraging YouTube’s many interactive possibilities.

Meanwhile, today brings the launch of “START” the new gaming channel from IGN, which News Corp. (NSDQ: NWS) acquired for $650 million in 2006. It will feature at least 5 long-form original programs, some of which will be produced by Reveille, another News Corp. property (coincidentally founded by Silverman) that is responsible for popular TV shows “Ugly Betty” and “The Office.” START will compete for audience with cable’s G4 among others.

On top of these are channels from celebrities like CSI’s Anthony Zuiker, Stan Lee, Jay-Z, Deepak Chopra and action sports stars Tony Hawk, Shaun White and Kelly Slater among others. Then there are a host of new channels backed by hugely popular online content destinations like Machinima, TED, SB Nation, The Onion, WSJ, VICE, MyDamnChannel, Bleacher Report and others. Each one of them will compete for attention, to one extent or another, with various channels found on the cable dial.

Beyond the channels themselves, there are also interesting dynamics regarding how YouTube will play a role in launching new talent. For example, I was intrigued by a session I moderated at last week’s NATPE Conference (where YouTube also had a huge presence) with David Sievers and Jeremy Welt, executives with Maker Studios. For those not familiar with Maker, it’s an online-only studio that is now generating over 500 million views per month via YouTube, and is also part of the 100 channels effort with its Maker Music channel. Something that really struck me in our conversation is how they view YouTube as offering a totally new playbook for breaking new talent. YouTube’s vast reach and engagement offer a vibrant platform for new artists to express their creativity and directly find their audience. The new channels represent a launch pad for them.

I was recently having a spirited debate over what impact new over-the-top alternatives will have on the pay-TV industry (e.g. cord-cutting, shaving, nevering, etc.) with a former colleague of mine from my cable days who has gone on to become one of the industry’s top researchers. My position was that the wasteful cross-subsidies inherent in multichannel subscription bundling, coupled with spiraling rates, will create momentum for Over-the-Top (OTT) options, eventually leading to fragmentation. The internet has proven itself ruthless in rooting out analog era market inefficiencies and long-term, I believe the video business will be no different. He took the opposite view, insisting the firewall is that the majority of new, compelling content is not available on the Internet.

That comment struck me as reflecting the same type of thinking as that of broadcast TV executives from 30 to 35 years ago as they dismissed nascent cable TV networks then airing a hodgepodge of re-runs and lesser sports. The lesson: it’s all too easy for incumbents to see the world only as it is, not as it could be. YouTube – and the many others who are pursuing original online programming – are still in their early days. But when combined with changes in viewer behavior, the proliferation of connected and mobile viewing devices and the firming up of online video monetization models, I’m betting that these efforts, particularly those led by YouTube, are going to be a highly disruptive force to the traditional TV ecosystem.

Will Richmond is president and founder of Broadband Directions LLC, a market intelligence, publishing and consulting firm specializing in broadband-delivered video, which he established in 2003. Will edits and publishes VideoNuze, a daily online publication widely read by broadband video decision-makers.

4 Responses to “What Broadcast And Cable Executives Still Don’t Understand About YouTube”

Another thought on YouTube – this hope based on a “niche thing” seemsÂ to run counter to what the bulk of consumers want – which isÂ to glom on to what everyone else is. PopularityÂ rules. How else to explain Lady Gaga’s fame, for example? THere are a hundred moreÂ Gaga-wanna-bes just waiting for their soon-to-be “professional”Â YouTube moment, but alas….

I think the key reason broadcast & cable execs don’t care is because, like film and all studio jobs, they are essentially lifestyle jobs – they get paid tons of money to create, or take the credit for creating hits NOT long-term strategic management of their businesses and share prices for shareholders. Comcast might care how NBC is doing long-term about OTT “narrowcasting”, but sure as hell their programming heads don’t or at least don’t have to if they don’t want to…

@StarJonestown:disqusÂ all good points!!!Â
Add to that the fact that all the niche cable channels referenced by the author – the ones that were “dismissed” as junk years ago – are all OWNED by the big studios!!!Â

In fact, look at NBCU – ALL of the revenue is from the cable side; the NBC side is financial sinkhole.Â So maybe the point is that media companies will buy Maker, Revision3, etc. etc. and just incorporate them as they did with cable over the last 20 years.Â Meet the new boss, same as the old bossâ€¦

The only lack of understanding is that micro- and niche- programming HAS ALL BEEN DONE BEFORE. Â Look at radio. Â Look at the 500 level channels on TWC. Â

The only lack of understanding is that the rest of us are getting really bored by technophiles claiming that the sky is falling and that they’re making it RAIN in this b*tch, and the rest of us ‘just don’t get it’. Â Guess what the number one new complaint is among youtube users? Â Pre-roll ads! Â Welcome to the big leagues. Â

Q: Â How many youtube hits is the Super Bowl worth right now? Â Answer: Â a googolplex.